Paper happens. No matter what we do and how electronic we are, if you are like me you still get swamped in paper, all of which seems financially important and vital. But do we need to save everything? What should we save, for how long, and what can we shred?
Document Management
The list below is from Bankrate.com and gives a clear idea of what to keep and what can be destroyed.
- Taxes and associated tax paperwork – Seven years. The IRS has six years to challenge your return.
- IRA Contributions – Permanent so you can prove your contributions at the time of withdraw
- Retirement Savings Annual Statements – Permanent (quarterly statements should be kept to be compared to the annual statement then shredded).
- Bank Records – Permanent if they relate to your tax records
- Brokerage Statements – Keep until you sell the securities
- Bills – Most can be shredded after the payment hits your account. Large purchases should be kept to prove value in case of loss (Think home inventory)
- Credit Card Bills – Save your receipts until you can compare them with your statement, then shred. Remember, if the bill is something dealing with your taxes, it stays for seven years.
- Paycheck Stubs – One year and match it to your W2. After that it is good to go.
- House Records – Keep permanently include all the home improvement costs you make too. If you decide to sell, this may help increase your home’s worth.
Other Sources for Financial Document Organization
Oprah’s O Magazine also has a great checklist on how long you should save your documents and allows you to write down where you store them. Another good article on tax records comes from Sandra Block’s article in USA today. Ms. Block talks about why you need to keep the documents and for how long and has a handy list of document to keep per the IRS. It is always good to err on the side of caution with your documents. You want to make sure you are covered in case you are audited. Your documents should be kept organized not only for your own peace of mind, but in case of audit. Filing things as you get them will save you a lot of time rather than trying to put together several years of data in a few weeks. The IRS will accept electronic documentation and even encourages it as backup in case of a disaster. This can save a lot of space, but remember to back it up! Not all organizations will save your electronic information. Banks will go back only a specific date range after which time you may not be able to access your electronic statements with them, or if you are able, it may take a fee to retrieve them. What do you do to keep your financial information organized? What documents do you keep or shred? I would love to get more feedback on this.